House of Commons Hansard #132 of the 35th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was finance.


Budgetary PolicyGovernment Orders

November 28th, 1994 / 11 a.m.

Victoria B.C.


David Anderson Liberalfor the Secretary of State (Parliamentary Affairs)


That this House take note of the opinions expressed by Canadians on the budgetary policy of the government and, notwithstanding the provisions of Standing Order 83.1, authorize the Standing Committee on Finance to make a report or reports thereon no later than December 7, 1994.

Budgetary PolicyGovernment Orders

11 a.m.


Jim Peterson Liberal Willowdale, ON

Mr. Speaker, it is a great pleasure for me to rise this morning. We are in the process of a historical evolution of the way Parliament deals with issues and, more important, we are as Canadians in a historic moment in terms of what we are going to do with our economic future.

Our combined federal and provincial debt is now greater than the sum of all economic activity in any one year in Canada, more than 100 per cent of our gross domestic product. This debt has been building for the last 20 years. Every minute that I speak that debt is going up about $85,000.

We are at the point at which one-quarter of all federal government spending is on interest alone. It is not even going to pay down that debt. One-third of all the money the federal government takes in goes to pay that interest. That means it cannot be spent on the programs which are necessary to build our economic future and create a fair and equitable society for all Canadians.

In spite of many declarations in the past by other governments, no government has yet come to grips with the problem of our mounting debt and deficit. In the budget of last February our finance minister said that we must start. We can no longer continue on this route and as an interim target over two years he said we would get the deficit down from about 6 per cent of our gross domestic product to 3 per cent.

This means we will have to go from about a $42 billion deficit this year to a $25 billion deficit within two years. If we assume a certain amount of growth in our economy this means we are going to have to intervene as governments never before have to strip over $9 billion out of this deficit through either increased federal revenues or cuts in spending. This is a monumental undertaking never before seen in the budgetary history of the Government of Canada.

To assist the government and all parliamentarians in this task the minister asked the finance committee, which I am honoured to chair, to undertake public discussions not only on the enormity of the deficit and how much we should try to get it down but whether his economic assumptions are valid. More specifically he asked us to consult with Canadians to find out exactly what we should do, where we should increase taxes if any and where we should cut programs.

Our committee has had less than two months, six weeks so far, to undertake this task. The minister appeared before the finance committee on October 17 and 18 and laid before us two major studies, one of which was the purple book, "A New Framework for Economic Policy", dealing with all of the broad aspects of our economic future, how we are going to sustain employment in the future, how we are going to cope with the changing world economy, the global environment in which we find ourselves, and take advantage of the new economy.

In this book he outlined five principles to which we must look. One is the need for Canadians to acquire new skills. The second is how all of us, including governments, can adjust to the changing economic circumstances, recognizing it is the private sector that creates jobs, and what can be the role of the government in aiding and abetting the private sector in this quest.

One of the major things pointed out is that the standard of living of all Canadians has really been declining in non-inflationary terms for the past 20 years and this just happens to coincide with a fall in the productivity of Canadians. Our major challenge, as we all know, is to take Canada, a country which in many ways has been a third world because of its heavy economic reliance on its resource sectors, to an economy which is really in the forefront of relying more and more on its human resources.

The third principle outlined in this book is getting government priorities right, which are the areas where we should be involved, how we can eliminate those aspects of our activities which are of a low priority.

The fourth principle is recognizing that we must as legislators and as governments play a role of economic leadership, recognizing as I stated that it is the private sector which creates jobs.

Also of concern is how the public sector works with the private sector to help bring about the transformation of our economy to implement the new technologies, to create the new type of infrastructure which can take us into the 21st century and be among the leaders in global competitiveness. How can we enhance further our exports? How can we aid and work with small business which will be the major creator of jobs in the future to ensure that it has the financial resources and the know how to be global players rather than simply backyard putters?

The fifth element of this study shows where government must play a leading role to create the type of monetary and fiscal climate which we need to make all of these other things happen.

I want to deal very briefly with the second study that he put before us. It deals with this fifth aspect of how we go about creating the jobs in the economy of the future, "Creating a Healthy Fiscal Climate". This was tabled by the minister before us on October 18. The next day our committee began its public hearings on this very issue.

Before I get into some of the details of what we have been hearing, members from all parties on this committee have taken the task extremely seriously. They have studied. They have agonized. They have brought different perspectives to our work. In many cases we as members of this committee have been able to arrive at a consensus built not only on our work as members of Parliament but more important a consensus arrived at listening to Canadians from coast to coast.

We have heard many witnesses in Ottawa and in every province as we travelled. We have heard from the usual suspects, the lobby groups that are well entrenched that have their head offices here in Ottawa and that we knew would come before us and whose advice we have actively sought. We have also heard from many individual Canadians who, concerned about our future, have brought their perspectives to our deliberations.

One of the major points of agreement that we have heard right across the country is we must go at least as far as the finance minister suggested to us in meeting our deficit targets. We must within two years get our federal deficit down to at least $25 billion.

A good number of witnesses said that government must go further than the $25 billion. We know we are in a business upswing at this present time. Growth is strong, job creation is strong, but it cannot last forever. There is an inexorability to these business cycles. We cannot sustain them on a perpetual basis, although everyone wishes we could.

There were many witnesses who said please go even further at this time. Some have said if we are going to cut or increase taxes to the extent necessary to reach these even expanded targets, targets beyond what the finance minister has asked of us, we run the risk of putting a brake on the economy and slowing the growth and the job creation that we already are experiencing.

Another consensus that we have reached is that we know we are going to have to make some cuts. Not one member of the committee and not one witness who appeared before us suggested that we could make cuts or increase taxes on the backs of the poor or the most under privileged or the least favoured of Canadians. All of us are aware of the high level of poverty in Canada, particularly among children. It would be unconscionable to think that the cutbacks we are going to have to make would be on the backs of those least able to deal with them.

In terms of specific solutions to our problems, the minister said to us: "Don't come back to me with generalities; come back with specific tax measures or specific cuts that we can make". Unfortunately the consultation process has been less than perfect.

We had a number of categories of witnesses who have appeared before us. There are those who say: "We are so special that we need not be part of this deficit reduction process. Our case is so special that we need added breaks; we need added funding". There are others who have come before us and said: "We are a special case; don't cut us. We will live with what you have given us".

There are others who at least tried to respond to the minister's challenge and came before us and said: "We are special. We can put a little bit on the table, but here is where you really have to cut, in somebody else's backyard". All too rare were the witnesses who came before us and said: "I have something to bring to the table. I seek nothing from it".

Those witnesses stand out in our minds. There was a wealthy person, Bob Blair, from Alberta who said that the generation of which he is a part, the generation of which we are a part, those who have enjoyed the benefits of this huge increased spending way beyond our means to pay it back over the last 20 years, those of us who have benefited so richly, have an obligation to give it back to our country.

He suggested that the wealthy could be called on to actually make donations to a deficit reduction fund for the state. That is the type of civitas, as the Greeks called it, or Greek leadership which I think all of us admire.

I remember a senior citizen who appeared before us in Atlantic Canada. He waited through a whole long day of testimony. He came before us and he said: "I am here out of a sense of guilt. I am a veteran. I get a pension because I was a prisoner of war during the second world war. That pension is about $10,000. I was never asked whether I wanted it or needed it, but it kept coming in and I have never sent it back. It's not even taxed. I am getting that and I don't deserve it. I'm not even a war hero. I bailed out over the Ruhr". This gentleman is prepared to put that money on the table to help the rest of Canada deal with this deficit crisis.

As I go through these deliberations I will always remember these two examples, rare examples, of Canadians who said: "I can be part of the solution". All members of our committee are convinced that whatever solutions we adopt, all Canadians, except those who are the least favoured, must be part of the solution. All Canadians must be asked to bear their fair share of the consequences of what we are going to have to do to wrestle that debt to the ground, to get the debt down so that our economy is once again growing faster than our debt. We owe this to succeeding generations to Canadians.

One of the major things that emerged during the course of our deliberations was that maybe my generation and the generations that have been living off this added borrowing, this added consumption over the past two decades and who are passing the deficit on to younger generations, have an obligation to pay even more than their fair share. It is a very interesting concept that was brought before us. It emerged in the concept of perhaps we should have a tax on inheritances so that some of the wealth that has been built up, at least in very rich estates, should go back to the state to help pay off the deficit.

We had a number of proposals before us which stated that taxes are almost at the breaking point. There is not much more juice to squeeze out of the tax orange by international standards and particularly American standards, which are the most important in this area. There is not much room to increase taxes and there may be no room. We have seen over the past decade how our personal income taxes have mattered and how they have become less and less progressive.

How do we create fairness when we are going about the process of cutting back on the deficit in a way that has never been undertaken before and which is going to have a dramatic impact on all Canadians?

It is going to be really tough. It will not be an easy job for us as members of Parliament and committee members, nor for the finance minister, the Prime Minister and the cabinet. It should and will be their responsibility to present Canadians with specific budget policy projects. We, the committee members, found a nearly universal desire in Canada to deal with the deficit, and to do it in a fair and equitable manner for all Canadians, especially the poorest members of society.

In going about this cutting, and we are going to have serious cutbacks in programs, the committee is not the only body looking at potential ways to deal with the deficit. A comprehensive analysis of all of our programs has been undertaken, a program review by the Government of Canada. Other committees as well have been charged with reviewing particular programs and undertakings. All these will be an important ingredient of this.

However, I suspect that none will have a greater impact than the recommendations of our finance committee which has had the benefit, for the first time in Canadian history, of public consultations with a broad range of Canadians.

One of the greatest advantages of these public consultations, which have never been undertaken, is that in the past those who could get in to the finance minister's office could make their case behind closed doors. The finance minister has said that this will no longer be the way prebudget consultation is carried out. It must be done in public before members of a committee that has all parties represented. We want all Canadians to see what special interests are being advocated, what privileges are being advocated and what solutions are being advocated.

Unfortunately we have not heard enough of the details on the solutions and not enough of a consensus has come to this committee across the board. As I mentioned, too much of the testimony has been "cut others but not us". This is why, as members of the committee, it will be our obligation to make some very hard decisions on where we might get increased tax revenues, where we might get rid of some inequities or unfairness in the tax system itself and where our priority for cutting programs will be. What are those programs which are necessary to sustain the social justice which is so much a part of Canada's fabric?

What are the programs which are necessary to maintain the balance that we have always had and which will always be a hallmark of our country, the balance between a vibrant private sector but a co-operative and supportive public sector which is necessary to maintain the balance of not cutting those programs which are going to actually help us build a strong economy in Canada for our future?

As we wrestle with these issues, I believe that the process of consultation with Canadians must not stop. We will continually seek their input. We must continually seek input from members of all parties of the House on an ongoing basis, members who are of good conscience and conscientiousness who have brought to us and laid out in concrete terms where they feel those priorities lie.

The task is not going to be easy. I know that Canadians expect us to deal with this deficit. They will treat us most harshly if, as previous governments have done, we pay lip service to the problem but do not tackle it directly, concretely and precisely at this moment in history. We have a window of opportunity. We shall not hesitate to act.

Budgetary PolicyGovernment Orders

11:25 a.m.


Yvan Loubier Bloc Saint-Hyacinthe—Bagot, QC

Mr. Speaker, as it has done since the beginning of the process, the Official Opposition is reminding you, Quebecers and Canadians of the seriousness of Canada's fiscal situation. Nobody, on this side of the House or on the other, is denying the existence of serious problems, and I would say that when it comes to federal public finances, we are actually dealing not with serious problems, but rather with a state of crisis.

One only has to look at how expenditures and deficits have evolved to realize that, in spite of the restraint measures of the last few years, the federal debt has grown to become one of the largest of any central government in the world. It is standing in the way of sustained economic recovery and job creation. This has been particularly obvious in the last two years as, in spite of certain signs of economic recovery and growth, jobs are not being created in a sustained manner. We are not denying the fact that we need drastic measures to reduce expenditures, as well as measures concerning loopholes in our tax expenditures, as the finance minister called them. I believe that there is a fairly broad consensus on this point.

However, we disagree on the means. For the next few minutes, I am going to talk about our analysis of the means used by the Liberal government or even the means suggested by our Reform colleagues. I will conclude by explaining why the Bloc Quebecois will vote against the motion before us this morning. We will not support the motion presented this morning by the Liberal government with a view to postponing the tabling of the finance committee report, because the reasons for doing so are not the ones stated by the finance committee chairman.

We have been convinced from the start that these consultations are a smoke screen. They resemble those held by the finance minister before tabling his first budget, last February. We are equally convinced that the Liberal government is seeking to first move back the deadline, and second reduce to nothing the amount of time to be spent analyzing and debating the finance committee's prebudget consultation report.

I can tell you that the motion before us, which seeks to postpone to December 7 the tabling of the report originally requested for December 2, is the result of intense pressure on the part of the official opposition. The initial motion submitted to the finance committee asked permission to table the report not on the 2nd, as requested by the House of Commons order, not on the 7th as sought in today's motion, but on December 16. They were taking us for something we are not and assumed that we would not remember that December 16 is the last sitting day of the year, and that next year we do not come back before February, the very month when the Minister of Finance is supposed to table his budget.

While claiming that there is a need for consultation, a need to seek additional ideas, the government is trying to hide its real intentions. We hear great sounding, compassionate speeches on the need to protect the neediest, but we are not being told the truth on the upcoming reforms. We are given grand speeches on the social situation, on poverty, when all the measures taken so far by the government, in particular since the budget of the Minister of Finance, were against the unemployed, welfare recipients, students and seniors.

Just think that the last budget contained a $5.5 billion cut in social programs, a large part in unemployment funds; is that a social measure, is that what the Liberal government intends to do for the neediest in our society? The major argument used to request further consultations is that we do not want to target the neediest.

Behind the grand speeches, there are barbaric measures, unprecedented measures, backward measures, measures that would be among the most backward taken by finance ministers for many years. Even the Conservatives did not dare make such drastic cuts in social programs. Yet, as the Auditor General pointed out, there is no analysis of the consequences of such cuts, we do not know the relationship between unemployment insurance and welfare, but supposedly we are doing a review of social programs even without proper information.

We are not the ones who said so, although we have in the past. The Auditor General himself reminded us last week that this government works the wrong way round; without any information at all, totally in the dark, it makes decisions that go against the poorest, all the while making grand speeches. Such behaviour is a disgrace.

Since the past gives us a good idea of what the future will look like, and since the Liberal government is trying to shorten the period of time for public debate on various measures relating to taxation, expenditures, issues concerning Quebecers and Canadians, since the past gives a good idea of what the future will be and since we are faced with this disgraceful shortening of democratic debate, I would remind you that since it has been in office this government has been proposing, in an acrimonious

and cynical way, projects with a view to reducing social programs or aimed at students, middle income people and the poor.

The government sends out trial balloons, not in a disinterested way but because this is part of the hidden agenda of the Minister of Finance and the Minister of Human Resources Development. For instance, when the government talks about taxing RRSPs, it is not out of the blue. The government, the Minister of Finance already intend to cut and tax RRSPs.

When they talk about reforming transfers to post-secondary education under CAP, the Canada Assistance Plan, and other transfers to provinces and send out trial balloons or make little suggestions in the four or five scenarios contained in the report of the minister responsible for the development of human resources, it is not by chance. It is because it is part of the federal government's overall plan to address the deficit problem, to deal with the problem of its indebtedness we all recognize by going after students, the provinces, with its usual way of transfering the burden to the provinces and shifting the deficit and debt problems onto the most deprived.

Members of the Liberal Party of Canada are counting on economic growth to improve somewhat the public finance situation, not because they believe there will be economic growth, but because they are unable to take any responsibility. This government has not taken its responsibilities since coming to office. It is so irresponsible that it claims that with the savings it made this year-more than $2 billion in unemployment insurance-the deficit for the current fiscal year is $39 billion when it is in fact over $42 billion.

It is unacceptable to cut into the unemployment insurance fund, to which the federal government no longer contributes, and to use the savings they made this year to reduce the deficit. It is a way for the Minister of Finance to improve his image, to look like a good manager, even though he did nothing to bring public finances back under control. He did nothing to close loopholes in the Canadian tax system-something he should have done long ago-, to correct long-time injustices that he too denounced when he was in the opposition.

This government is not serious in its endeavours and does not inspire confidence, especially since it is only managing the downsizing of a crippled system. On our side, the most blatant sign of that remains the closing down of the Saint-Jean military college. There is talk about cynicism and acrimony. For me it is a real symbol, more than a symbol right now, especially when we see the Minister of Intergovernmental Affairs wearing the button denouncing the college's closure, as the Leader of the Opposition noted over the week-end.

Such behaviour is scandalous and shows a cynical and acrimonious attitude. It is also disinformation since this minister is himself responsible for closing the Saint-Jean military college. Such disinformation and cynicism are typical of this government's general attitude, particularly with regard to the important issue of Canadian public finances.

This is intolerable, especially since the Liberal Party of Canada used to advocate transparency, social justice and fairness when it was in opposition. Liberal members used to describe the Conservatives as almost extreme rightists, but they are even worse now that they are in power.

Much needs to be done, if we look at the growth of government expenditures as well as the public debt crisis situation in Canada, with growing deficits, year after year, and a growing national debt. We did not wait two months after the finance minister's testimony before the finance committee to come up with suggestions to put some order in public finances. We were upfront. We made suggestions in front of the Minister of Finance, after he had made his statement and tabled his two books, the colour of which I cannot remember. There has been books of so many different colours tabled this past year, Mr. Speaker, that we loose track.

Unlike our colleagues, we did not wait two months to suggest, first of all, that the Liberal government do the responsible thing and take steps to recover-at the time, this is what we were suggesting two months ago-some $6 billion in unpaid taxes.

In fact, this first suggestion we had made to the Minister of Finance when he testified before the finance committee was reflected in the Auditor General's report tabled last week. But the Auditor General does not talk about $6 billion, as we had estimated, but over $8 billion in unpaid taxes, a quite substantial amount that taxpayers in Quebec and Canada owe, on average, to the federal Treasury in personal income tax, profits tax and goods and services tax as well, the famous GST, which is apparently the most commonly abhorred tax from coast to coast.

Two months ago we suggested to the Minister of Finance, and to the Minister of National Revenue also take the necessary steps, departing from their usual laissez-faire policy, to recover these $6 billion which became $8 billion following the recent tabling of the Auditor General's report. What did they do? Nothing.

We also suggested to the Minister of Finance at the time to ensure that the federal government withdraw from any provincial jurisdiction, in other words, that it mind its own business, in

view of the assignment of jurisdiction under the Canadian Constitution and many interpretations that have been given these past few decades.

We said then, and we repeat it now, overlap, duplication and instances of federal interference, which are increasingly numerous and even more centralizing with a Liberal government, amount to, by our estimation, approximately $3 billion per year. That is money! But of course when you ask senior department officials to see where the federal government is meddling needlessly and ineffectively in fields of provincial jurisdiction, they are both judge and party to the case. They will not shoot themselves in the foot. These senior officials who are in control will not reduce their staff, their power, their interference or their budget. Over the years and again recently, the Auditor General has found empirical evidence of duplication and overlap between the two levels of government, but the Liberal government does not want to face up to its responsibilities.

That is the second suggestion we made to the Minister of Finance about a month and a half or two months ago. We suggested that he not reduce corporate subsidies a little, as we have heard fairly often on both sides of the House, but that he eliminate them. Companies receive $3.3 billion a year in subsidies. Here, we are not talking about subsidies for regional development which have the merit of reducing regional disparities in some disadvantaged regions; instead, we are talking about direct corporate subsidies, which more often involve patronage or paying off the party's friends rather than useful subsidies.

Budgetary PolicyGovernment Orders

11:40 a.m.

An hon. member


Budgetary PolicyGovernment Orders

11:40 a.m.


Yvan Loubier Bloc Saint-Hyacinthe—Bagot, QC

I would not go that far, but in any case it has not been proven that these subsidies are effective, provide benefits and have an impact on the competitiveness of businesses. On the contrary, when you subsidize a company in a particular industry, the subsidies allocated under this $3.3 billion are unfair to the others who cannot benefit from them. And they still want to cut spending on the backs of the most disadvantaged people but do not even mention eliminating these $3.3 billion in corporate subsidies.

Do you think that is right? Is it right to cut unemployment insurance, welfare and post-secondary education while the finance committee and others still continue to leave these $3.3 billion in direct corporate subsidies? That was our third suggestion then to the Minister of Finance.

We also suggested that the Liberal government withdraw immediately from the Hibernia project, and we are no longer the only ones saying so. Almost everywhere, people are speaking out against the continuing waste which has already swallowed up $3 billion in direct and indirect spending, loan guarantees and so on from the federal government. This year we have been told about an additional $250 million for a project that will never make a profit, that relies on an increase in global oil prices, when all forecasts to this day call for an even greater reduction in the price of a barrel of oil than we are now experiencing.

Why do they insist on the federal government, Quebec, Ontario and other Canadian provinces getting involved in a project that will never be profitable? And if it is profitable, why is the private sector not doing all the investing? Why must the federal government continue to invest hundreds of millions of dollars every year if the project is supposedly profitable? The 1960s and 1970s are over. Let us look at the state of government finances. Even my Liberal colleague, the chairman of the finance committee, mentioned earlier that government finances are in a state of crisis.

Despite the serious problems, they continue to spend money on this project, perhaps for political considerations, thus contradicting the Prime Minister's position during the vote on the Hibernia project. It is impossible to understand. If this is not political expediency, I wonder what it is. That was our fourth suggestion to the Minister of Finance, which has not been acted on to this day.

We also suggested to the finance minister that $1.6 billion be cut from the National Defence budget in response to last year's request by the official opposition that this budget be slashed by 25 per cent. Again, this suggestion was not followed up.

We also asked the finance minister to reduce the government's operating expenditures by tackling mismanagement and widespread waste. There are many examples of waste and inefficiency, starting with the Auditor General's last report. I will give you just one because I do not want to take up too much time, even if I have unlimited time for this debate. The Department of National Defence is one example that has been popular with all of us for a while, especially since last week, when the Auditor General pointed out cases of gross mismanagement and inefficiency. They always boast that things have been put into order at the Department of National Defence in the recent past, but after reading the Auditor General's last report, we see that this department is a total mess, that it has become a symbol of public affairs mismanagement.

I will quote just a few passages to illustrate what I told you. The Auditor General's report outlines several cases of waste. It says among other things that real property mismanagement at DND costs $100 million a year. Real property mismanagement alone costs $100 million; they throw away all that money while maintaining that the only way to reduce waste and increase

efficiency in public finance management is to cut social programs.

The report also points to waste in the F-18 performance evaluation program. We are told that the program might be ready in 2003, or 20 years after its implementation, and that the automation of the Canadian military police records will have taken 26 years, if the goal of completing the project in the year 2000 is achieved. Imagine, 20 years for the F-18 performance evaluation program, when you think that, after 20 years, an F-18 jet is considered obsolete. And 26 years to automate the Canadian military police records. In my short career, I never thought such delays were possible.

In his report, the Auditor General also says about National Defence that the army, air force and navy have each developed their own information, command and control systems which have little interoperability. Imagine, our national defence is comprised of three forces that should normally interact through office automation and information technologies and systems, but these systems are virtually incompatible. We are told that the three forces have very limited interoperability.

Given the situation in National Defence, one can guess what goes on elsewhere. We have a serious problem because it involves hundreds of millions, or billions of dollars. We read that: "There are plans for future information technology projects with projected costs of $1.2 billion". Mr. Speaker, implementing these projects will cost $1.2 billion, but they are not supported by adequate cost estimates.

In other words, we are spending $1.2 billion to implement technology projects, new technologies, but we have no serious study on the value, efficiency and usefulness of these projects for the future of the three forces of National Defence.

Here is another example, which again concerns the Department of National Defence. The Auditor General writes: "The Department did not have an adequate system in place to assess the cost-reduction potential of information technology projects or to weigh the benefits of cost reduction against other priorities. As a result, the Department has not benefited from at least $700 million in possible savings". Just think! We are talking about hundreds of millions, even billions. But it does not seem to matter. The government prefers to cut spending by targeting the poor and let outrageous situations like that go on.

This is incredible. I am flabbergasted. I was even more outraged last week, when the Auditor General tabled his report because, based on what the other side had been telling us over the last year, we thought that public finances had at least improved somewhat. This is not the case however.

Some measures need to be taken regarding taxation. Until the Liberal government takes concrete action, we will not stop repeating that it must end the unacceptable situation created by family trusts. The government must stop losing hundreds of millions every year by allowing very rich Canadian families-not middle income families, not fairly rich families, but very rich families-to use family trusts to defer for up to 80 years taxes on capital gains.

These very rich families do not use family trusts as an investment tool for future generations, or to help sick or handicapped children and relatives to be financially secure: They use these trusts as a powerful tax planning device. According to some tax experts with an excellent reputation in Canada, such as Sydney Goldstein and Neil Brooks, to whom the Liberals used to listen when they formed the opposition but no longer do so now that they are in office, it is outrageous to maintain these trusts for very rich Canadian families.

They suggest that, through special studies conducted by Statistics Canada, or through data from Revenue Canada or major corporations managing the assets of these family trusts, such as Canada Trust, which is a major contributor to the Liberal Party, the government could obtain sufficient information to make an annual estimate of what family trusts set up for the benefit of very rich families really costs Quebecers and Canadian taxpayers.

During the hearings of the special committee set up to examine family trusts, as openly as possible, as the Minister of Finance put it, the Official Opposition asked Revenue Canada to provide these data. That was two months ago and we are still waiting. Our request has not even been acknowledged. If this is what is meant by transparency, we have a problem, because Liberals and the Official Opposition obviously do not have the same definition of transparency.

Mr. Farber, from the Department of Finance, also told the finance committee that a legislative authority would be needed to collect this information using a tax slip. We have submitted such a request. And again we are still waiting for an answer. Not only did we not get an answer, but I can tell you that, even though they talk about transparency and their will to correct all fiscal inequities, we have not had any co-operation from the Liberal Party or the senior officials of both the Department of Finance and the Department of Revenue. Could it be that these senior officials have been ordered by their superiors not to say anything and not to take any step to collect data on family trusts?

We could also mention all the measures needed to correct the tax situation, including the tax conventions signed, as we said before, between Canada and countries with many tax loopholes. Despite the steps taken by the Minister of Finance in his last budget, a recently released study, carried out, I believe, by Samson & Bélair, says that, in spite of everything, all the government's attempts and all the measures included in the last budget, there are still hundreds of millions of dollars being exchanged between Canadian businesses and their foreign subsidiaries located in tax havens and losses incurred by the subsidiaries being reported in Canada for tax deduction purposes. According to the Auditor General and this Samson &

Bélair study, it is estimated that hundreds of millions of tax dollars are lost this way.

I have a quote here that I would like to read to my hon. colleagues in English, if they will excuse my horrible accent. It says: "The new rules have some merit", meaning the measures taken by the Minister of Finance. "They will most certainly generate ambiguity and uncertainty. Unfortunately, the 1994 proposal did not bring the changes we were all hoping to see".

In other words, the action taken by the finance minister is not enough to prevent tax treaties with countries where corporate tax rates are lower than here, in Canada, countries such as Barbados, Cyprus, Malta and Papua New Guinea, for example.

Because of these tax treaties, businesses, mostly very large corporations, do not pay their fair share of taxes here, in Canada, and we deliberately allow some of these corporations to forego their tax responsibility and to benefit from these tax loopholes, these tax havens, thanks to which they can legally save hundreds of millions of dollars in federal taxes.

We cannot afford these tax conventions any more, especially with countries that are well-known tax havens and where tax loopholes are legion. This is utterly unfair when everyone else is being asked to make sacrifices, from middle-income families to the less-privileged, everyone except these large corporations, which take advantage of the Canadian tax loopholes and the tax breaks deliberately included in the tax treaties signed by Canada and these tax havens.

There is also the whole question of corporate taxes. I tell you this should be examined carefully.

I submit that the recent data from Statistics Canada on the trend of corporate versus individual contributions to the tax base reveal some clear facts. Remember that these data are expressed in real terms, which means that they take 1986 as the reference year. These are real data which take inflation into account. Thus, in 1950, Canadian corporations contributed $3.2 billion to the federal and provincial treasuries. The same data, with 1986 being equal to 100, reveal that in 1992, Canadian corporations contributed $7.4 billion. But the $3.3 billion in subsidies to businesses I was taking about earlier must be deducted from those $7.4 billion.

So, when those $7.4 billion actually paid by corporations to the federal and provincial treasuries are reduced by the $3.3 billion in subsidies, we have exactly the same amount as in 1950. The tax burden of companies did not increase in real terms but, for individuals, that burden went up from $3.3 billion to $87.6 billion.

So there is a problem, and I can tell you that it is probably related to the tax breaks used by very large businesses. The Ontario Tax Equity Committee pointed out in 1990 that Canada's large businesses can use about 60 tax breaks that allow them not to pay their fair share of federal taxes even though we could require them to do so. This has been going on since 1950. And I am not talking here about very small businesses or small and medium size businesses, which do their job. If you look at the data, you will see that they contribute, as good corporate citizens do, to the federal and provincial treasuries. I am not talking about businesses in my area.

Last week, I was talking to the owner of Grégoire & Fils, a business that does research and development work in the farm equipment sector in my riding. I am not talking about his business. I am not talking either about Dutailier Inc. and Lacasse, two businesses that export furniture outside the country without any grants. I am not talking about these small and medium size businesses that create hundreds and even thousands of jobs, because that is what small and medium size businesses do, they create thousands of jobs.

I am not talking about these businesses that perform their tax duties and contribute to economic growth, job creation and regional development. I am not talking either about a businessman like my friend Jean-Marc, from the south shore, who has to face very fierce competition from large multinationals in the steel equipment sector. He creates 43 jobs and pays his fair share of taxes. I am referring instead to very large companies who take advantage of measures that are legal, but are sometimes borderline measures, to prosper at the expense of a deteriorating Canadian fiscal situation, and to companies that use legal measures to avoid paying their share of taxes to federal and provincial governments.

For a year now, I have been examining the Canadian tax system more seriously and specifically than previously, and I find it is distorted. It is so distorted that last week, my friend Léo-Paul Lauzon, a well-known tax expert in Quebec, sent me a newspaper clipping he found in La Presse , I believe. I know I cannot show that clipping, but it was found in classified ads and says in big print: Tax losses for sale''. The ad reads:Our client, a cosmetics distributor with significant tax losses and undervalued assets, is looking for a buyer who could use those tax losses. Confidentiality guaranteed. Please, contact so and so-I will not mention the name of the agency-number so and so''. In other words, our system is so distorted that we can now sell tax losses. Tax losses are sold like shoes, eggs or chicken. They are sold to companies that want to reduce their annual income.

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12:05 p.m.


Jean-Guy Chrétien Bloc Frontenac, QC


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12:05 p.m.


Yvan Loubier Bloc Saint-Hyacinthe—Bagot, QC

Is that right?

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12:05 p.m.


Jean-Guy Chrétien Bloc Frontenac, QC

Certainly not.

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12:05 p.m.


Yvan Loubier Bloc Saint-Hyacinthe—Bagot, QC

It is not, but I do not sense across the way any desire to deal with loopholes in the corporate tax system. They are not even willing to examine the corporate tax system. Every time the Official Opposition suggested such an examination, even during the election campaign, it never got an answer. We tried again recently in the finance committee, but we did not get any answer. In that regard, the Liberal government members sitting on the finance committee can rely on the complicity of the Reform members because they do not want the corporate taxation to be examined either. It is serious when you think that some people even refuse to look at the corporate taxation. We are not suggesting any cuts, but simply to look at the problem in order to perhaps confirm what has been rumoured for several years and confirm also some warnings put forward by the General Auditor of Canada as well as some analyses made by tax experts. We are now completely fed up with this situation.

It is obvious, and I stress, obvious, that we have to find ways to improve the management of public finance and we were the first to realize that the problem is very serious. While the Minister of Finance spoke only in terms of problems with public finance, we used a much stronger term. We spoke of a crisis. Indeed we recognized even more than the finance minister himself that if things keep going on as they are now, the situation will become impossible.

However, what has the Liberal government been doing for a year now to help remedy this situation? In relation to what we and others suggested the government should do to stabilize public finance, what else did it do but take on unemployed workers and welfare recipients, senior citizens and now students with the reform proposals put forward by the Minister of Human Resources Development, and middle income families with all the trial balloons sent up left and right by the Minister of Finance, his officials or his Secretary of State? What else did it do but take on poor families? Every week, I meet some of them in my riding. Families are getting poorer and poorer.

In fact, in this International Year of the Family, families are getting poorer and more desperate because they see that, in spite of all their fine speeches, the fine election campaign the Liberals conducted last year, the compassion they said they felt for the most disadvantaged, they are even more extremist, more reactionary that the Conservatives were at times. They are even more extremist than what they denounced as Conservative policies when they were in the opposition.

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12:05 p.m.


Jean-Guy Chrétien Bloc Frontenac, QC

That is double talk.

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12:05 p.m.


Yvan Loubier Bloc Saint-Hyacinthe—Bagot, QC

It is double talk, as my colleague puts it. But I would even say that it is close to something like calumny.

Speaking of poverty, I would tell you that for the last 15 years, the evolution of poverty in Quebec and Canada is a cause for concern. The poor in Quebec and Canada today do not deserve the treatment they have been subjected to this past year.

I would like to mention briefly certain statistics on trends in poverty since 1973 to show you how badly the situation has deteriorated and the need to put in place real economic development policies, real job development policies, real labour training and regional development policies in order to stimulate Quebec's and Canada's economy. We do not need infrastructure programs which are subject to patronage and create only 45,000 part-time temporary jobs when we need close to 800,000 jobs to get back to the level of the early 1990s; we need real measures.

Since 1973, the number of poor families in Canada has increased by 41 per cent. During the same period, the number of poor people living alone jumped a significant 79 per cent. I am referring here to a study published by Mr. David Ross three weeks ago and which updates data on poverty in this country. If you want more details, and if my Liberal colleagues want to know that they are in fact deteriorating a situation which is already catastrophic for the poor families of Canada, I will gladly give you a copy of that study.

It says that the rapid growth of poverty among young families in Canada is one of the most disturbing trends in the area of family poverty. Not only are people getting poorer, but an increasing number of young people are in this situation. It is young families who are getting poorer. We had never seen that before.

Between 1981 and 1991, the poverty rate of families with parents 25 years old or less has almost doubled, increasing from 21.7 per cent to 40 per cent. This means that the number of young families living in poverty has nearly doubled. That is how we prepare young people, that is how we give them hope for the future, by making them poorer at a much higher pace than that experienced by their elders.

Another piece of information I thought could help this government become aware of the problem is that, in 1991, the number of poor dependent children under 18 years of age was close to 1.8 million. The poverty rate for single mothers is 52.1 per cent in Canada. It is interesting to know these statistics. Women who are single parents are the ones who suffer the most from inequities in terms of income and services, both in Quebec and in Canada. Compare that with Sweden, for example, where the poverty rate among single mothers is 6 per cent.

We used to say that education was to key to a good income. Well, let me mention some important data relating to graduates. Although people have diplomas, and it is a fact there is less poverty among people who are educated and who are flexible as a result of that education, and of course an education is always enriching, but it is not as enriching, in the literal sense, as it used to be. In 1981, 13.5 per cent of graduates of an educational institution, were poor. Today, more than 30 per cent are in that category.

I wanted to mention these figures in the House because they profoundly disturbed me. I thought, and that is what we learnt at school, at college or university, that thanks to post-manufacturing economies and the new global economy, and with the development of the leisure society, modern, industrialized societies would, over time, become prosperous. People said that in the early seventies. Today, according to the update published by Mr. Ross on poverty figures in Canada, the exact opposite has occurred.

It is a sign that we will need a major turnaround in the Canadian economy. This government will have to act responsibly, not by hitting at those who have trouble making ends meet, but by doing what we strongly suggested it should do, which is to carry out a thorough reform of the tax system and cut spending of the kind we pointed out earlier and have been pointing out to the Finance Minister from the outset, and especially since he appeared before the Standing Committee on Finance. But we want this government to stop coming down on people who do not deserve that kind of treatment.

In conclusion, I want to say that we will not be a party to the trivializing of democratic debate that was reflected in the motion presented this morning. We will not be a party to any measures that may appear in the finance committee's report, the majority report by the Liberal members of the finance committee. I have the impression, and I have been saying this for some time, that the government decided long ago what measures it would take to improve its finances and to reach the objective set by the Minister of Finance, and I am referring to a deficit that is 3 per cent of GDP in 1996-97. Furthermore, these measures are so appalling and entirely in line with the approach of the last budget of the Minister of Finance, in other words, a well-organized attack against the unemployed, senior citizens, welfare recipients and students, that the government is ashamed to put them before the House on December 2 as planned, and that on the other side of the House, they are trying to reduce the number of days provided to debate these suggestions.

Again, we will not be a party to a debate the Liberals do not want, a debate in which their promises will come back to haunt them. We will not be a party to what is actually nothing but a masquerade, to these endless rounds of consultations, because this government consults right and left but only retains what suits its purpose.

We saw this with the last budget, when the Minister of Finance approved a suggestion to make cuts in the Unemployment Insurance Fund, although there were thousands of suggestions that said not to do that. So much for consultation.

For all the reasons I just mentioned, the official opposition will vote against the motion presented by the Liberal government, and we will do so proudly, with our heads held high, because our aim is to defend the interests of Quebecers and Canadians, as we have done since the very beginning.

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12:15 p.m.

The Acting Speaker (Mr. Kilger)

I remind the House that the length of speeches pursuant to Standing Order 43 will now be 20-minute maximum interventions subject to 10-minute question and comment periods.

Of course sometimes there is a practice where parties or members wish to split their time. I would simply ask members to indicate to the Chair if and when that should occur. Otherwise, members will be recognized for a 20-minute intervention and 10 minutes of questions or comments.

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12:15 p.m.


Jim Abbott Reform Kootenay East, BC

Mr. Speaker, I am interested in many of the comments which were just made by the Bloc member who sits on the finance committee. I am hesitant to dignify some of his comments with my own because of what his leader said yesterday. I wrote down the quote.

I saw his leader say on television that the Bloc are "a superficial event in the political landscape". That out of the mouth of his leader gives us an idea of the commitment of the Bloc to this whole budgetary process. When the member uses the terms barbaric measures and retrograde and he uses other words outside of the House that are not particularly helpful or constructive to the debate I think it does a disservice to something that is so desperately serious for this nation of Canada.

He did make a comment in his long and rambling speech about the fact that even the Conservatives did not apply such cutbacks. Well he is right and that is exactly why we are in the position we are right now. The Conservatives did not have the courage to cut back the tremendous debt that was left to them by the Liberals.

We thought $180 billion left over by the Liberals from the last time they were in power was a terrible debt. The Conservatives did not have the courage to do the cutting. As a consequence this country is now faced with a debt of over one-half trillion dollars.

However I just cannot leave alone the comment the member made that somehow there are difficulties with numbers. I have no idea where in the world he would be able to say that the accounts receivable to national revenue have suddenly gone from $6 billion to $8 billion in the Auditor General's report. That is not factually accurate.

If the member has taken the time to read presumably the French version of the Auditor General's report, I am assuming he is referring to the reference made by the Auditor General to the fact that some of the accounts receivable are getting on to being two years old. As they form part of the $6 billion his concern was that they were not collectable.

It probably falls much in line with the member's constant going on in committee about the fact that there is an average of $42 million in each and every family trust. He just did not take the time in committee to listen and understand that the report he was referring said that the average assets in the firms reporting were $42 million. It was simply a quantifier in order to determine the type of firms that were replying to the survey. As a consequence the Bloc has been telling us, telling us and telling us that there is an average of $42 million in the family trusts.

It is not just the Bloc. The member for Gander-Grand Falls also feeds into some of these misconceptions that there are these tax loopholes and tax havens and tells us about all these millionaires who are collecting UI. For many Canadians they want an easy way out. Don't we all? Many Canadians are looking for some justification for not making the cutbacks. All of us as politicians have to be very careful. We must make sure what we are saying is factually accurate and that it does not feed misconceptions.

I challenge the Bloc member on his comment that direct subsidies to the business sector of $3.3 billion somehow do not include the subsidies going to business through things like ACOA, western diversification and the funds going through to Quebec. He seems to have classified these as being direct subsidies to the business sector.

The bottom line is I look forward to debating with people who will take the time to read the numbers and if they do not clearly understand the numbers will take the time to receive advice. Then we can share our opinions based on fact instead of some of these things that are simply made up.

In the 20 minutes allotted to me to speak to this issue the people of Canada should know that we will go $1.4 million further into debt. Every day Canada spends in the neighbourhood of about $460 million. Of that $460 million we have to go to the marketplace and secure $110 million. It works down to $1,700 per second that we are borrowing.

Why is that important? It is important because even under the Liberal plan we will be going further into debt by $25 billion every year. Even under that anemic plan Canada will slip a further $100 billion into debt in the time the Liberals are in office. That is absolutely monumental. We do not know what the interest rates will be but at a 7 to 10 per cent interest rate on that $100 billion we will be paying $7 billion to $10 billion extra in interest at the end of their administration.

That number is very important when we consider that the federal government transfers $2.2 billion to the provinces for education. Let us understand and compare that $7 billion we are going to go further into debt to the $2.2 billion we are presently providing for education.

Before I get into the Reform proposals I will make one more comment. Of the $110 million we are going to go further into debt today, approximately $45 million of that will be borrowed from foreign markets in this 24 hour period. That means one year from now because we are going $110 million further into debt we are going to be streaming $3 million more out of Canada to foreign capital markets.

What could we do with $3 million? There are people in my constituency around Cranbrook who want a CAT scan machine. It will cost in the neighbourhood of $100,000 and the funding for staff and training perhaps will take the same amount of money.

However we are prepared to let $3 million for this one 24-hour period on interest leave the country. If we want to talk about barbaric and retrograde, we can apply those terms to what we are doing in the intergenerational transfer of debt to our children, our grandchildren and our great grandchildren.

It is easy to apply labels to certain aspects of this whole process which is unfortunate. As the committee chairman so aptly said in his presentation earlier, there is absolute commitment. I believe there is commitment from the Liberals, as I am sure there is from the Bloc and I confirm the Reform Party is committed that the people who have the least ability to look after themselves must be looked after. They must be protected.

Therefore, why is the Reform Party recommending that we go to zero instead of going to 3 per cent or approximately $25 billion? Precisely for the reasons indicated by the chairman. We are currently in a very strong period of economic growth. It has been very clearly illustrated that the difficulty and the reason we are having problems in getting any real job recovery along with the economic recovery is that people are being taxed out of business, taxed out of existence.

There are some differences of opinion between us and the Liberals. In making our presentation to the Commons committee it was interesting that we managed to flush out what some of those differences were. In the judgment of the Reform Party, there must be a very serious look at the whole issue of taxation and how it is done to make sure that inequities are ironed out, that there is more fairness and that any loopholes are corrected. In spite of that and as a matter of principle we believe no more tax dollars are available from Canadians.

It was interesting that the member for St. Paul's said: "Your comments on taxation are rather anemic. There is a bit of a throw away line about not objecting to the principles eliminating inequities in the existing tax system. We have heard much testimony. Did you hear nothing that piqued your interest, that led you to say yes, there is something that should be examined on the tax expenditure side for instance? Was there nothing that caught your fancy?"

In a second intervention he said: "I am in rare agreement with the member from the Bloc then perhaps because the vision that you present is a vision that is far different than I have for this country and the role we have to each other as Canadians".

The vision of the Reform Party in terms of its responsibility to the country is to get the government off the backs of Canadians and once and for all straighten out the situation so that it is no longer grabbing, grabbing and grabbing capital from a very weak and anemic capital market. It is absolutely accurate and correct to say that taxation is simply the confiscation of working capital; that is all it is. Taxation is simply the confiscation of wealth.

If we take more wealth, more capital, out of either businesses or the hands of ordinary people they will have less to put back into generating more activity in the economy. I underscore then that we believe there should be no net increase in taxation.

We established our program on five basic principles. The first one is that the people at the top of government must be the first to make significant and visible sacrifices.

I was asked by a member of the House why we spent last Tuesday, our opposition day, on a motion to get the pensions of MPs into line with ordinary pension plans available to all other Canadians. It was really interesting, by the way, because every one in the Chamber voted against the motion to get the pensions of MPs into line with ordinary citizens, save the 41 Reform MPs who initiated the motion. That pension plan must be reformed as of a year ago.

Also there should be implementation of across the board budgetary restrictions of 15 per cent to high level government institutions. We saw this last week the appointment of people to the Senate, the appointment of the Governor General, and therefore the traipsing out of what these people do in their public lives. People have started to take a look at that, have started to focus on that and ask themselves: "Just a second, isn't this the same government that is asking me to cut back?"

Next is eliminating excessive travel of federal officials and reducing the number of ministers of state and associate ministers. People are looking for leadership, but unfortunately for many political commentators they seem to leave it at that as though somehow it might be a solution to the problem. It is a solution to the problem only in the respect that people are looking for forceful and aggressive leadership. They are looking for us to take a step forward and to take the cutbacks necessary ourselves.

I have already indicated that funding must be maintained for high priority items. There are two high priority items in my mind. First is enforcement particularly with the departments of justice and the solicitor general. Second, every effort must be made to ensure that those who are least capable are able to be provided for. Third, there must be a cutback and elimination of the duplication of efforts among respective departments.

There is also something very interesting here. Part of the problem is that we do not seem to have an understanding on the part of many people, many reporters and many commentators in particular in the news media. We certainly do not have an understanding on the part of many people on the back benches of the Liberal Party of the aspect that there must be substantial cutbacks.

I noticed in the Ottawa Citizen over the weekend an article written about a program put on by CTV called ``Due South''. It was interesting. It asked people if they had seen the program. Some people had seen it and hated it; other people had seen it and loved it. The point is that it was done without tax dollars.

The commentator was basically asking why we should be celebrating the great commercial success. Why should we be celebrating that we have people employed in Toronto in the film industry putting the thing together? Why should we be celebrating that it is a commercial success because it has 20 editions on the CBS network? Why should we not be celebrating the programs that are truly Canadian rather than just commercially viable programs?

I will tell that person why. In this 20 minutes we will be going $1.4 million further into debt. That is why we must take steps to ensure that things like the film industry are privatized. We must reduce subsidies to national museums and galleries as worthy as they may be. If you haven't got it, you shouldn't be spending it. That is exactly what has been going on. There are $450 million available there.

I would like to make another comment about the Department of National Defence. The member of the Bloc was raising the issue of the Department of National Defence. My own personal position is: for people to risk their lives, whether it is in helicopters off Labrador, in the former Yugoslavia or on a barricade wherever it may be in Canada, do we expect them to be given the tools and the training? If they are putting their lives on the line they must be properly supported.

We combined the spending cuts that had already been put forward for the Department of National Defence, together with the $300 million that had been recommended by the joint committee and came up with a figure of $1 billion. I say to the House as an individual that if we want to cut more from the Department of National Defence the first thing we must do is establish our priorities, our objectives for national defence. I for one will never stand for anyone making arbitrary cuts without first determining there will be a rollback in the services the Department of National Defence will perform.

We believe a dollar in the hands of a taxpayer is more productive than in the hands of government. The finance minister said very specifically that subsidies build dependence. I do not know whether members happened to see the front page of the Financial Times a couple of weeks ago. It showed that for every dollar a person in British Columbia puts into UI he or she gets 70 cents or whatever out. Whereas for every dollar a person in Newfoundland puts in he or she gets something like $3.70 out. Even within UI there is a transfer of wealth. These things must be looked at. Am I suggesting this should not be? I am simply raising the issue that at the moment there are transfers of wealth that build dependency.

We have specifically said, for example, that we should reduce the subsidy to the Canadian Broadcasting Corporation by $365 million. It was interesting on CTV over the weekend that there was some speculation the government was also considering that. It is a simple thing to do. Mr. Speaker, you may be aware of the fact that my tax dollars, the tax dollars of Canadians and the tax dollars of CTV were used by the CBC to outbid CTV on the rights to the Olympic games. That was absolutely bizarre.

All sorts of cuts must be made, but the bottom line to the exercise is that there are no simple answers. It is up to all of us as politicians and to the news media to take on the responsibility of acquainting the people of Canada with the fact that there is no easy way. It is going to be tough but there is a light at the end of the tunnel if we are prepared to get aggressive on the debt.

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12:40 p.m.


Yvan Loubier Bloc Saint-Hyacinthe—Bagot, QC

Mr. Speaker, when I hear Reform members making comments, I always ask myself whether they are aware that the party in power is not the Bloc Quebecois but the Liberal Party of Canada. They are always directing their attacks at the Bloc Quebecois; I do not know why, but I find it a little strange.

I also noted some insults that were directed at my party, at the work that each member of the Bloc Quebecois is doing and the seriousness with which we take our responsibilities as the Official Opposition, and I was deeply offended. Since the beginning, we have been doing what is expected of us in Quebec, and I would tell you, even in Canada in some respects, because some of our Canadian friends from the Maritimes, and even from western Canada and Ontario, speak very favourably about the work that my colleagues are doing as members of the official Opposition in this House. The same cannot be said about the Reformers. Even in western Canada, they are starting to loose ground, but that is their problem.

With all due respect for my colleague, who is also on the finance committee, I would have a question for him. If the Reform Party is so serious in its offensive, in its suggestions for improving Canadian public finance, why does it leave aside a whole section of taxation, a whole section of grants, too? Why is corporate taxation excluded? Why does the Reform Party refuse to even discuss corporate income taxes?

Why is it so dead set against it? Is it a definite mind set? Is it dogmatic? Why does it reject the review of tax conventions signed with tax havens, when the Auditor General, who is objective, and even Samson Bélair suggest that hundreds of millions are lost because of these infamous conventions which are perfectly legal but, in my opinion, totally immoral, considering the present state of public finances?

How is it that my colleagues in the Reform Party do not want to review this aspect of taxation? Why do they refuse to budge when we mention family trusts?

Even in the subcommittee set up by the finance committee to examine family trusts, they ridiculed the review of this question, something requested by the Minister of Finance. Why do they keep such a closed mind on discussing family trusts and such an open mind on cutting unemployment insurance, the Canada Assistance Plan, federal transfer payments for post-secondary education, the budget of the Canadian Broadcasting Corporation-a stupid measure to cut 30 per cent, one third of the budget, suggested last week-, and all the measures taken at the international level?

Why is the Reform Party so opposed to a serious review of this issue? If they are really serious, they should quit being so dogmatic every time we suggest something which might impact on companies, on very rich Canadians and on certain members of their own party.

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12:40 p.m.


Jim Abbott Reform Kootenay East, BC

Mr. Speaker, taxation, as I have indicated, very simply is the confiscation of wealth. If you will pardon the term said in humour, it is legal robbery. In other words what basically goes on is that the people who come to this Chamber make this grab legal by virtue of the fact that they are entitled by Canadians to do so. It does not make any difference. The taxes that are taken from individuals and the taxes that are taken from business in a Robin Hood style are then redistributed.

There are some services, particularly in the area of protection and in the area of the environment-

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12:45 p.m.


Dennis Mills Liberal Broadview—Greenwood, ON

What about health care?

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12:45 p.m.


Jim Abbott Reform Kootenay East, BC

Health care is a good example. There are some excellent examples of the intelligent use of these taxation dollars but nonetheless they are confiscated from businesses and from individuals. We believe, and I state again, a dollar in the hands of the taxpayer is more productive than in the hands of the government.

I would like to take the member up on his comment once again about family trusts. There is somehow a myth which he and his colleagues have bought into that there are countless billions of dollars there. I use that $42 million per family trust figure as an example. When they ask for quantification to say how many dollars are in family trusts, and then turn around and say because Revenue Canada, because the Department of Finance will not give us these numbers that somehow they are trying to hide these numbers from us, the process truly is not open.

The only way that we could quantify how many dollars are in family trusts is if we in this Chamber made the determination that we were going to tax wealth. We tax income, not wealth. To accurately identify how many dollars are in family trusts, because family trusts are a part of the entire relationship between people and companies, we would have to quantify how many dollars perhaps the Speaker is worth, perhaps that I am worth, perhaps that the member is worth. Then we would be able to determine on the basis of this wealth that maybe we will tax you 1 per cent of your wealth over $100,000, whatever the number is.

It is a completely erroneous position to take in my judgment that the finance department and the revenue department are somehow surreptitiously or overtly withholding information. The information does not exist, so how can they give it to the committee?

The member said that some of my comments were an attack on the BQ. I guess that is part of my problem because I find some of the comments to be somewhat nonsensical.

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12:45 p.m.


Pierre Brien Bloc Témiscamingue, QC

Mr. Speaker, I listened to the Reform member mention the wealth in family trusts and that it would amount to taxing wealth, as if wealth was a concept that applied only to the rich, because we could not care less about the wealth of the poor. Therefore, it is not a problem to tax them, increase their burden, reduce the services provided to them.

My question is this: He knows full well that the Bloc Quebecois has been asking for information on family trusts, that is to say that family trusts should declare their assets, rather than only their revenues. Why is he opposed to the finance minister saying in his next budget: This year, everybody with a family trust will have to declare the assets in the trust. How else can he justify his being opposed to this but to preserve the freedom of those who have family trusts? How could such a measure be catastrophic for these people?

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12:50 p.m.


Jim Abbott Reform Kootenay East, BC

Mr. Speaker, there are basically two aspects to family trusts as there are with anything. There is this aspect of real property, the capital gains portion on real property to which the members keep referring. The other is marketable securities or other assets of that type. I do not really understand. The information does not exist. It is that simple.

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12:50 p.m.

Broadview—Greenwood Ontario


Dennis Mills LiberalParliamentary Secretary to Minister of Industry

Mr. Speaker, I would like to begin by picking up on some of the comments that other members have made in this debate so far, that we are dealing with a very complex issue.

I refer to a paper that was delivered at the University of Toronto last August 8 and 9 at the Institute for Policy Analysis. It was delivered by Professor Pierre Fortin from the University of Quebec. The title of this paper was "A Diversified Strategy for Deficit Control: Combining Faster Growth with Fiscal Discipline".

I would like to read a few comments from the abstract of this paper, which I recommend to all members because it deals with the complexity of the challenge before us:

"Under current projections of economic growth and fiscal policy for the next two years, the probability that the federal government will achieve its stated goal of bringing down the fiscal deficit to 3 per cent of GDP by 1996 is almost zero. Four types of changes could improve the odds that the target be achieved: one, faster economic growth; two, a decline in interest rates; three, additional cuts in program spending; four, increases in tax rates.

"It is possible to develop a diversified strategy that would: one, allow the deficit target to be met by 1996; two, achieve continued reduction of debt and deficit beyond that day; three, permit the economy to return to full employment by 1999; four, preserve the gains already made against inflation. That strategy would have lower interest rates, raise the average growth rate of real GDP to 5 per cent per year over the next five years. A nominal freeze on program spending would be imposed in 1995 and 1996 and would be followed by moderate real growth in 1997 to 1999. There would be no increase in the global effective tax rate".

For the largest part the paper exposes the analytical and empirical foundations of this proposed combination of accelerated growth and fiscal discipline. I quote specifically from that paper because I realize that Professor Fortin is a respected economist in this country. I have heard he is someone who from time to time would even give our members in the Bloc Quebecois some advice. It was for that specific reason, aside from his reputation, that I tried to get into his paper.

I believe that all members in the House have really put the right emphasis on the cuts. I do not think anybody watching the debates that are going on around here would question the commitment, the focus or the debate on cuts. We cannot turn on a light around here these days without somebody saying do not do that because we have to save money. The message of working on achieving cuts has been well impregnated into the thought process of this Chamber and of this city.

The other area of tax reform in my mind has not really been put on the front burner to the level it should be, but the real issue for me has to do with faster growth. I believe that is where we as members of Parliament are falling short.

If we are going to meet the challenge of getting our deficit and debt house in order we are going to need growth in the country. We are going to need jobs. We are going to need investment. We are going to need the entrepreneurial spirit recharged.

I believe passionately that we will not achieve the growth that we must achieve if we are going to meet these targeted numbers unless we reform the tax system. The current tax system is no longer trusted by business or by the average person in terms of the personal side. Look on the business side right now. There are 37,000 tax cases before the courts with a burden on the justice system because of the tax act challenges coming from business. Most Canadian recognize that.

There is something else that we as a government have to face. Members have touched on it this morning. We are now competing more than ever for capital around the world. We are in a globally competitive regime for capital. In order to have capital move to our community, move to our country, we have to have a globally competitive tax regime.

We should not look at these other countries that are attracting capital for investment in their communities in a condescending way. We should realize that they are ahead of the game. They are ahead of us. They have realized that point. Today capital can move with the push of a button.

If people who have wealth, capital and are entrepreneurial achievers see that by getting a better tax break by pushing or parking some of their wealth in either the islands, Switzerland or some other part of the world, why would we not expect them to try to do that? We would not want them to just leave their money here after they had worked hard to achieve this wealth when we did not make any effort at reforming our tax system or recognizing that those wealth generators are an important factor in generating jobs and growth in this economy.

The challenge of reducing the deficit and debt is inextricably intertwined with having a tax system that will reverse capital flows. I will try to explain this.

If we have a tax environment that attracts capital from all over the world all of a sudden in our community, in our financial institutions we will have a glut of capital. When we have a glut of capital that means costs will go down. When costs go down the interest rate on serving our debt is going to put a lot less strain on the fiscal framework of our country.

More important, if we have capital in our community that is not expensive, that is readily available, the entrepreneurial spirit which needs access to that capital can go out and do what it does best, take risk and create jobs.

When those jobs are created, once again on that side of the ledger we are going to be putting less pressure on the fiscal framework of this nation.

I believe that we have a challenge here. We have achieved the notion. I would give the Reform Party some credit for pushing this whole subject of cuts almost through the wall, but I really believe that we as a government and as a Chamber now have to put an equal amount of thinking and creativity on how to get some growth going.

One cannot get growth with the current tax system. The current tax system is a disincentive to achievers. It is a disincentive to risk takers. It is a disincentive to the entrepreneurial spirit in our country. That entrepreneurial spirit which is required for taking chances and throwing out ideas that can create jobs needs to be nurtured. We are not doing that with the system that we have today.

The problem when one tries to reform a tax system that has looked after every little interest group in this country is that the political will becomes very fragile. As members know I have been trying, I believe in a constructive way, to reform the tax system of the country over the last five years.

I realize that this may be the last chance in the government's term to reform the tax system. If we do not take on the challenge of comprehensive tax reform in this budget, we will have committed ourselves to a pathway or a direction that will carry us for the term of this government. For me, the next 30 to 45 days is crucial if we are going to address the whole issue of comprehensive tax reform on the personal and corporate side.

As I started to say, the difficulty we are going to have in trying to achieve tax reform is that every interest group in the country has a built-in measure of support in the current tax system.

As many members know, I have been advancing this notion of the single tax system for the last few years, continuing to refine it. Many times Canadians will say: "Why is it that you are having problems in moving this debate forward?" I always say: "First of all, there is a basic tax lethargy in the country. The second thing is that when you go to eliminate the preferences in the tax system, people become very queasy. Their political will does not tend to remain strong".

In the latest proposal that our team has put forward, some of the income deductions that would be eliminated are the following: attendant care expenses; moving expenses; workers' compensation payments; employee home relocation loan deduction; the stock option and shares deduction; the capital gains deduction; the northern residents deduction; forward averaging; employer paid health preplanned premiums; child care expenses; receipt of intercorporate dividends on the major tax credits eliminated.

There is everything related to tuition, education, certain medical, labour sponsored funds, political contributions, investment tax credits, et cetera. There are a lot of preferences that have to be eliminated if we are going to have tax reform in the country.

I believe the tax system is the one instrument that the Government of Canada has that can move the whole spirit of the country. It is the one act of Parliament that touches every single Canadian. If we redesign the tax act in a simplified, fair, efficient way so that all Canadians can feel that they are part of the tax renewal movement, that will be the spark that is necessary to first of all get capital flowing into this country. By having a globally competitive tax system, capital will move here. That in turn will ignite that entrepreneurial spirit again, to take chances and invest in our communities, which is how jobs are created. At the same time it is going to give us the ability, because of that uptake and faster growth, to make those cuts in program spending a whole lot easier because the growth will have picked up some of the pain that will be there because of these deep program cuts we are going to have to make.

I welcome this debate today. It is a very important debate on the eve of preparing the budget. However, I caution members to consider, as Professor Fortin has stated in his paper, that we cannot just look at a system where we only have fiscal discipline. At the same time we have to create an environment where we can have faster growth. We need faster growth. You cannot spark, induce and motivate people into taking chances and getting this economy going unless you hit them with a fair and constructive tax system.

Budgetary PolicyGovernment Orders

1:05 p.m.


Jean-Guy Chrétien Bloc Frontenac, QC

Mr. Speaker, we have been listening all day to speakers from both sides of the House expressing their views on how to run this country rationally. We are presented with the following alternative: on the one hand, cut services, social services naturally, and on the other hand, increase taxes. Never was sound management mentioned.

When I was mayor of Garthby township, we were required to bring down a balanced budget, because municipalities were not allowed to have deficits. When I see a government trying to play Santa Claus, wasting public funds, being generous, extremely generous and acting in such a way that the next two or three generations will have to pay for this generosity today, I cannot help but worry about the fact that we need to borrow in order to pay current debt charges.

I could give this Liberal government a number of examples of sound management. But last year, before Christmas, the Minister of Intergovernmental Affairs and member for Hull-Aylmer travelled aboard a government jet to go and deliver two ten-minute conferences on the benefits of sound government management, at a cost of $170,000. Also, the restaurant on the 6th floor of this building lost $2 million last year, and most of this deficit is due to the fact that senators and members forget to pay before leaving. Apparently the waiters do not run too hard after their clients either. Two million dollars.

The operation of the other place costs $65 million each and every year. The government could manage a little better. When I hear that good taxpayers owe government $6.6 billion are these friends of the regime? I do not know. Corporations, companies, small and medium size businesses owe $6.6 billion. The government is forced to borrow today because it is dirt poor, yet it does not collect what is owed. A government that is unable to collect its assets does not deserve to govern the country.

Mr. Speaker, I think that you too were the mayor of your municipality, so you know full well what happens to voters who do not pay their property taxes. After three years, their property is sold off to pay taxes.

Budgetary PolicyGovernment Orders

1:10 p.m.


Dennis Mills Liberal Broadview—Greenwood, ON


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1:10 p.m.


Jean-Guy Chrétien Bloc Frontenac, QC

My question is this: I know that the Liberals want to preserve family trusts and tax shelters for their friends because they need them to fatten up their election fund.

Budgetary PolicyGovernment Orders

1:10 p.m.


Dennis Mills Liberal Broadview—Greenwood, ON

Question! Question!

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1:10 p.m.


Jean-Guy Chrétien Bloc Frontenac, QC

Why does the hon. member for Broadview-Greenwood not talk about sound management? I will always remember when we had work done in the sixth concession road in my parish-and I will close on this-, all local truckers were hired to widen the road by laying 12 inches of good gravel. Of course, the trucks were not fully loaded so some taxpayers asked me to do something about it. I told them that it was not us but the provincial government that was paying. When they heard that, they went away reassured. Today, whenever Canadian taxpayers hear that expenses will be paid at a higher level, they feel as though the money will come from the sky. Yet, you never say anything about sound management. Very often $175,000 contracts could be carried out for $20,000 or $25,000.